Liberty Mutual Claims it was Victim of Fraud by General Re

Liberty Mutual Insurance Co. claims that it has been the victim of fraud. The insurance company asked a federal judge to undo part of a recent settlement by General Re Corp., a reinsurance unit of Warren Buffett’s Berkshire Hathaway Inc., with federal investigators. Gen Re agreed in January to pay $92.2 million to resolve charges that it entered into sham reinsurance contracts with American International Group Inc. and Prudential Financial Inc. that made those insurers’ financial statements look better. Prudential settled civil charges in 2008, after the SEC accused it of violating financial reporting provisions.

In a filing with the U.S. District Court in Manhattan, Boston-based Liberty Mutual claims it deserves $12.1 million that the reinsurer paid to the U.S. Securities and Exchange Commission as part of the settlement. Liberty Mutual claims it had been unaware when it bought some Prudential property and casualty units in 2003 that those units were involved in what Liberty Mutual called a fraud scheme with Gen Re. It said the reinsurer later paid it $29.2 million out of $41.3 million owed under some agreements, but paid the balance to the SEC. Liberty Mutual complained that the SEC rejected its request to put the sum in escrow until a court or arbitration panel could decide who had a right to it. Liberty Mutual now wants the Federal Court to amend the settlement.